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Regulatory impact on service provision to institutional and private clients

Jim Gilligan, Managing Director Carey Commercial Limited and Carey Trustees Limited Q&A with... Jim Gilligan is the Managing Director of Carey Commercial Limited and Carey Trustees Limited, which provide services to institutional and private clients. Jim is based at the Guernsey headquarters and the IFC Economic Report spoke to him about the business in the Channel Islands and the impact of regulatory changes locally and globally on the nancial services sector there. How is business? Jim Gilligan: Business is good thank you. We have been seeing an increase in new business levels across our corporate, fund admin and private client teams over the last year or so but also a great deal more activity from within our existing client base, which has generated a lot of extra work. This has led us to hire around 10 more staff in the last year and now the total number of staff in those teams (and support areas) is approximately 50. The Carey Group has a long association with the Channel Islands - how has being based in the CIs facilitated the company’s success? JG: The first entity formed in the wider Carey Group was in Guernsey in 1968 and was what is now called Carey Trustees Ltd. Our shareholders then and indeed now are Guernsey based individuals. The Channel Islands have always benefited from being positioned close to the City of London, which is one of the top locations for those seeking structuring advice. What historically has set these two Islands apart from other jurisdictions is that they have been proactively amending their laws and generating new ideas to enhance the structuring opportunities for these London based advisors. This approach combined with a history of staff development and training has allowed us to provide a level of service which I feel simply cannot be bettered elsewhere. How important are the high standards of regulation in the Channel Islands to maintaining an efficient and competitive business in today’s financial landscape? JG: It is interesting that you have referred to our regulatory standards as ‘high’, as those of us in practice here don’t really consider them to be high but merely normal. As a business we have discussed the issues we face as a jurisdiction when competing with those we perceive to be working under lesser guidelines. We have focussed on a fewer number of higher value clients rather than the higher volume model seen elsewhere and those clients value and understand our regulatory framework. What has been fascinating in recent times are the changes to our industry that started with US FATCA then UK FATCA and shortly with CRS. The increased drive for greater transparency and legitimate transfer of information has required jurisdictions to move towards a higher level of regulation and record keeping. Whilst there has been an impact on local businesses with regard to FATCA/CRS, it is more the procedural planning that has impacted us and not really the way in which we work. This is more or less how we have been operating in the Channel Islands for quite some time now. How is the working relationship between the island’s financial services companies and the financial regulator? JG: We have seen a greater interaction with the GFSC. Over recent years the GFSC has spent a lot of time and resources on understanding how licensees manage the risks inherent in their business and indeed understand how our board is positioning for the future. This allows them as a body to understand the future shape of the regulations to assist both regulator and licensee. SPECIAL REPORT: THE CHANNEL ISLANDS 29 IFC_ER6_LF_Compliance_Special_Report_Jersey_rev4.indd 29 07/12/2015 11:15 Do you feel that the current swathes of regulation hitting the industry may be in danger of stymying competition for businesses in IFCs? JG: As I mentioned above, I think other jurisdictions are starting to suffer as they have to adapt to these new regulations. The Channel Islands have always tried to lead in regulatory and compliance matters and so whilst I believe that these changes may increase the costs for all jurisdictions and thus clients, it will impact practitioners less here. How has the company accommodated FATCA – has there being any impact on, for example, US clients? JG: As a board we were recently discussing projects within our business and it will not surprise you to hear that the FATCA/CRS project has had the biggest time impact of all. We as a business embraced FATCA from the start and have been working with our external advisors on the matter throughout. We have also been aiming to educate our clients across the globe as we go and what has been surprising is that they are frequently tell us that they are simply not hearing the same messages from other jurisdictions that they work with. The US clients are already going through the process but as a firm we are trying to work now to a CRS standard as that will be a much greater challenge than the US and UK clients. We are currently looking at replacements for our database, which will ensure we can efficiently prepare the reports required to the local Guernsey tax office and provide us with the electronic capability to deal with future tax reporting requirements. What is of note is that the systems we are looking at would not look out of place in an international bank rather than an independent fiduciary group! A lot of Western financial services providers have been looking at Asia, Latin America and other developing economies , has the Carey Group identified any specific new markets? JG: Our client base at Carey Group in Guernsey is very well diversified and we have been servicing clients in various locations for a number of years. The only market we are not active in is Latin America, possibly due to historical reasons more than anything else. Our teams work with clients from North America, through Europe into the Middle East and the Far East. Within the last two months our funds team have visited Hong Kong, the corporate services team have visited New York/ Chicago/South Africa and I will be spending the next week in the Middle East with some of our private clients. ESMA have recommended Jersey and Guernsey for an AIFMD passport – how important is it for the Carey Group’s funds division that this ‘passport’ comes into effect? JG: An AIFMD passport will be of interest to fund promoters and make Guernsey a more attractive jurisdiction in which to set up funds which is clearly a positive for Carey Group’s Guernsey office. For Carey Group as a whole we have a Luxembourg office providing fund administration from within the EU and Guernsey and Zurich offices providing fund administration from outside of the EU so our business can already meet client expectations with respect to choice of an EU or non-EU domicile. The fund managers whose structures we administer in Guernsey have been able to operate to date successfully through the national private placement regime, and we hope that this will continue alongside the potential for a passport where required. It has been well reported that the Channel Islands funnel a lot of investment into the UK, do you feel the importance of the islands to the UK economy is still underestimated? JG: The Channel Islands have a symbiotic relationship with the City of London whereby we facilitate investment into and out of the UK without penalising those investors through a layer of double taxation. I think that the Channel Islands provide the UK with an accessible and robust platform for fund raising to generate inward investment. This is not readily appreciated by many in the media although Guernsey Finance and their Jersey counterparts have been providing third party data on this point. Is the move towards transparency within financial services causing difficulties for businesses or opening up the market and creating a level playing field? JG: This is quite a difficult question to answer because most respondents will attest that there has been little impact to their business. We have, however, seen an increase in new business from introducers who may have suggested multiple jurisdictions previously to existing clients, asking us to take over structures that were previously managed elsewhere. The service costs and regulatory frameworks are changing quite dramatically in some jurisdictions and it would seem in some instances that the providers and their service levels may be struggling to cope with this. Guernsey introduced the foundation relatively recently – how does this compete with the trust structure and following on from that how do Guernsey trusts compete with trusts and other private client structures available in other IFCs? JG: Guernsey fiduciaries have for many years administered foundation vehicles for clients from other jurisdictions and due to demand the Island has developed its own. What is great about the industry is that whilst there is competition globally for clients, when each jurisdiction creates a new section of law or introduces a concept from elsewhere, they tend to improve it a little each time. This is where I think we are with the Guernsey foundation. This is not intended to compete with the trust structure but to provide a sophisticated alternative that may meet the needs of the client more. The trust will I feel always be the most frequently used vehicle but the Guernsey foundation allows clients from a civil law jurisdiction to understand the vehicle more. We have used it to orphan off rights for European fund structures, as an alternative for 30 IFC ECONOMIC REPORT • WINTER 2015/16 IFC_ER6_rev.indb 30 04/12/2015 15:08 COMPLIANCE SPECIAL REPORT: THE CHANNEL ISLANDS COMPLIANCE SPECIAL REPORT: JERSEY private clients more familiar with civil law and also we created a Foundation to act as a trustee for a family office structure. This last point was interesting as the family did not like the concept of a purpose trust at the top and also part of the assets held are regulated financial services companies, some of which operate in countries that do not recognise a trust in their law. The points were addressed successfully with this structure. With regard to how Guernsey trusts compete with those available in other IFCs, I feel that as the industry has evolved these differences have narrowed. Jurisdictions adapt and evolve their laws to cherry pick parts from other jurisdictions (as we have seen in Asia). As a business we operate from Guernsey structures with laws from many other jurisdictions on behalf of our clients. Maybe the key question for clients is to decide what is their preferred combination of regulatory framework and levels of services. Can you tell us what the future holds for your company in the Channel Islands – how are the products and services on offer evolving to suit the new regulatory landscape? JG: We are aiming for and achieving steady, managed growth across our three product lines of private, corporate and funds businesses. Increasingly we see the boundaries between each of these becoming blurred with fund managers, institutions and ultra-high net worth families utilising structures including protected cell companies, unit trusts, foundations and limited partnerships as well as trusts and companies to enable investment into similar assets such as commercial real estate, private equity and SPECIAL REPORT: THE CHANNEL ISLANDS venture capital opportunities. We will continue to provide our services within the new international regulatory environment and will adapt as required to ensure the needs of our clients and their legal/tax advisors are met. Should and could Guernsey and Jersey work together more to further the fi nancial services sector in the Channel Islands? JG: When I travel outside of Europe potential clients refer to “the Channel Islands”. I think the two Islands are synonymous with high standards, high quality products and a good regulatory framework, and so should inevitably work together to jointly enhance these reputations. Jersey’s world class reputation as a leading International Finance Centre is endorsed by independent bodies and institutions of the highest standards. With an AA+ rating from Standard & Poor’s, clients are comforted by the strength and security of Jersey’s financial and political stability. A sophisticated and comprehensive infrastructure of laws have kept Jersey at the forefront of global finance for over 50 years, attracting deposits and investments from institutions and private clients across the world. For more information, please visit www.jerseyfinance.je Perfect co-ordination, expert execution. Belgium / British Virgin Islands / Bulgaria / Cayman Islands / China / Curaçao / Cyprus / Czech Republic / Germany / Hong Kong Hungary / Ireland / Jersey / Luxembourg / Malta / Mauritius / Netherlands / New Zealand / Poland / Romania / Singapore Slovakia / Spain / Switzerland / Taiwan / United Arab Emirates / United Kingdom / United States www.vistra.com For further information please contact: Jane Pearce Managing Director jane.pearce@vistra.com Tel +44 1534 504730 Steven Rowland Head of Business Development steven.rowland@vistra.com Tel +44 1534 504707 Solutions for Private Clients We recognise that all of our clients are dierent in terms of their personal and family business situations. Vistra oers a tailor-made approach to create structures to suit the family or business needs of our clients and manage those needs across future generations. Vistra oers a variety of solutions including: • Trusts • Private trust companies • Foundations • Partnerships • Private managed companies 31 “I think the [Channel Islands] are synonymous with high standards, high quality products and a good regulatory framework, and so should inevitably work together to jointly enhance their reputations” IFC_ER6_rev.indb 31 04/12/2015 15:08

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